Online Market Share Leads Digital Growth Strategies

An online business will find the future bleak if it doesn’t cope with two basic facts: audience growth has slowed to single digits while the creation of new sites is growing at high double digits.

Growing online market share is the best and possibly one of the few remaining strategies that can increase the chances of a digital business surviving in the years ahead.

Certainly, it requires businesses to grab newly created audiences, but it also requires taking audience away from competitors.

In the early days of digital, even a somewhat badly run online business could grow simply because the online audience was growing at such a rapid pace and there were far fewer competitors than exist today.

In some cases, that easy growth lead to complacency and even incompetence.

There was a time when Compuserve was the arrogant leader of the dialup online world, followed by Prodigy and AOL. Yahoo was the undisputed leader of search — before the arrival of Google.

Many online businesses have risen and fallen, far more than have risen and succeeded. It’s just that most people read about the successes and big guns. The failures usually go away quietly.

Growth Rates

Many sources of information about growth rates are available, but some are more reliable than others.

One of the better sources is the U.S. Census Bureau, which produced a report about Internet usage at home in the U.S. The most recent data is from a 2013 report with data going only to 2011, but it clearly shows a flattening of usage in 2010 and 2011 in the graphic below.

Internet usage growth. Source: U.S. Census Bureau

The most recent Domain Name Industry Brief from Verisign shows another type of slowdown. The number of Top Level Domains (i.e., .com) grew only 1.7 percent in the first quarter of 2014 versus the same quarter in the previous year. Total domains grew by 7.5 percent.

Likewise, a chart from InternetLiveStats.com shows not only a flattening of the number of Web sites from 2012 through 2014 but even a small decline. (The number of “discovered” Web sites is much higher.)

Another chart from the same site shows a dramatic decline over time in the average number of users per site — from 19 in 2003 to four in 2013.

Shifting to Market Share

A slowing of growth is inevitable because of low single-digit population growth and high penetration rates.

If an online business is willing to accept a growth rate equal to the growth in population, then so be it.

“If (an online business) is building a business plan that assumes a higher growth rate, it must pursue market share for audience and revenue as a core strategy.”

If it is building a business plan that assumes a higher growth rate, it must pursue market share for audience and revenue as a core strategy.

One obvious step is to analyze the competition and create benchmarks for comparison.

The other obvious steps break down into product and marketing.

On the product side:

Make the site faster than the competition. Optimize graphics, reduce scripts, monitor server performance.

Spend money wisely on advertising so that it converts effectively into more revenue and loyal return visitors.

Anecdotally, more small and mid-sized sites are reporting slowdowns or even reversals in revenue and audience as competition increases and technology splinters into other distribution forms such as mobile.

There was a time when Google, Facebook and other big players grew because of the growth of the Internet. They now grow as much as anything because they are grabbing market share. Smaller players can learn an important lesson from their behavior.